Here's John Gruber on Microsoft, Past and Future. I enjoyed his take on things following Microsoft's recent appointment of Satya Nadella as it's new CEO. He comments on Microsoft's stated goal of PC domination in 1977, through the achievement of that goal in the mid-90's, to what they did after they reached that level of utter dominance. My favourite part:

“A computer on every desk and in every home” was incredible foresight for 1977. It carried Microsoft for 25 years of growth. But once that goal was achieved, I don’t think they knew where to go. They were like the dog that caught the car.

And the uncharacteristic acknowledgement by Steve Jobs to Wired in 1996 that Apple had lost:

"The desktop computer industry is dead. Innovation has virtually ceased. Microsoft dominates with very little innovation. That’s over. Apple lost. The desktop market has entered the dark ages, and it’s going to be in the dark ages for the next 10 years, or certainly for the rest of this decade.”

My main thought on Microsoft is that Windows is not their future. I think that most people's main computing device 5 years from now will be their tablet and/or smartphone. The average person is not good with a personal computer, and doesn't need one for many tasks. And they'll need one for even fewer tasks in a few years, as tablets and smartphones become even more capable. I know people who already don't touch a computer at home and might only use one at work for email and Microsoft Office. I believe that trend will accelerate in the coming years and the average person will have virtually no need to own a Windows PC or Mac, especially as internet bandwidth and cloud services continue to improve. Why would you ever need a traditional computer if all the things you did on a computer could easily be done on your tablet? Email, social networking, browsing the web, online shopping, reading, are all better or, at least good enough, on tablets and smartphones now. Business apps for mobile devices are improving, as well. I believe it will be only a matter of time before the average person can do most of the word processing and spreadsheet activity they need on tablets without it being a worse experience than a computer. And the need for local storage should continue to shrink as cloud storage becomes cheaper, more reliable (looking at you iCloud) and more common. Don't get me wrong. Traditional computers aren't totally going away anytime soon, but the days of everyone needing one at home are coming to an end. Most people just don't do a lot with their computers.

Sales of Windows PC's peaked back in 2010 and are in decline. What will be Microsoft's bread and butter in the future? I wouldn't be surprised to see Microsoft follow the path of IBM. IBM was "Big Blue" in the PC market to which Steve Jobs referred back in 1983. They were the nemesis of Apple in the PC war long before Microsoft. By 2005, IBM had sold off their PC business to Lenovo. IBM didn't fail. They're still a very successful and massive company. They just aren't known for the same things they once were. And IBM keeps quietly making money ($16.5 billion in net income in 2013). My gut tells me that this is the direction Microsoft will head, especially in light of the introduction of Satya Nadella (former head of the Server division) as their new CEO. Windows phone and Surface tablets don't seem to be gaining any traction. Xbox has done well and may continue to do well, but it's not a big money maker and the game console market is a relatively small one.